Saturday, March 26, 2011

Budget fast-track or bust!

Stop the presses! Prime Minister Donald Tusk took off the populist cap he's increasingly comfortable wearing to put on his thinking cap, even if only for a moment, and present a good idea. A day after he vowed to punish evil speculators for increasing prices, Tusk pledged to get the 2012 state budget adopted by July 1, the day Poland takes over the EU presidency and ahead of the October parliamentary elections.

Tusk said adopting the budget early -- it's usually adopted in December-January -- would minimise fuss and allow the government to concentrate on the EU presidency. It would also enable his Civic Platform (PO) to focus on winning the elections.

Deputy Finance Minister Ludwik Kotecki, who first floated the idea, was more honest: adopting the budget early would minimise not fuss but the chance vote-crazy members of parliament adopt spending increases in the run-up to the elections that will further stretch an already stretched budget.

Tusk and Kotecki are right. MPs are notoriously bad at looking to divvy out the pork ahead of elections. In 2005, an army of miners demonstrated violently outside of parliament a couple months before the election. Did MPs stand fast in the face of insanely costly pension calls? Nope. They caved in faster than an Albertan bobcat. The cost of giving miners special early retirement rights is some 70 billion zlotys over 15 years.

MPs don't of course only hand out largesse to miners. They cut taxes, up subsidies, increase subventions, and hike anything that can be construed as "popular." Then, when elected, they blame their predecessors for everything for 1-2 years until the accusations start ringing a little hollow.

Tusk's plan is not without its flaws. Adopting the budget early will mean drafting macro assumptions like GDP growth and inflation early, decreasing their likely accuracy. Since the budget is in many ways based on these two indicators, big forecasting misses could lead to bad budgeting.

But the idea is right in its essence. Before Tusk puts his populist hat back on -- to announce that advertising is actually evil or something -- I hope he walks the expedited budget walk.

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